Is Apple planning a DVR and web-enabled TV set?

Experts reckon Apple is getting serious about the living room

Apple executives call the Apple TV a hobby, but it appears they may hold big plans for the product, which saw sales triple year-on- year during the company's most recent financial quarter.

As the global migration to digital television gathers an impressive momentum, with audiences going online to services such as Hulu, iPlayer or iTunes, Gene Munster of investment banking firm Piper Jaffray now anticipates sales of 6.6 million Apple TVs by the end of this year.

Munster also expects a launch this year of brand new Apple TV hardware equipped with a TV input and DVR functionality. Furthermore, he also anticipates an Apple branded television set equipped with Apple TV-like features by 2011.

Munster explains: "We are expecting Apple to design a connected television over the next two years (launching in 2011) with DVR functionality built in. These recorded shows could then sync with Macs, iPhones and iPods over a wireless network. The device would push Apple further into the digital living room with interactive TV, music, movie and gaming features. With its iTunes ecosystem, Apple could develop a unique TV without any set-top boxes or devices attached."

The proposition has numerous advantages. While sales of TV shows and films through iTunes could suffer a slight impact should the company implement DVR features in the product, the Apple TV might become the single solution that replaces your DVD player, cable box and games console. Note that the iPhone and iPod touch, together with the App Store, have already seen Apple develop closer relationships with games publishers than ever before.

Third party development

Given that these partners are already now developing using the OS X-based iPhone SDK, it's no giant leap of fancy to confidently speculate on future full-strength games for the Mac from these games developers. Clearly, Apple TV could also benefit, should the company introduce an SDK for the existing or future generation of the device.

The hard work of the Boxee team – who have developed a far more advanced home entertainment system for Apple TV – proves the existing system can already be extended. "We would love to see Apple investing more resources in the living room," said Boxee CEO, Avner Ronen. "Whether these are new versions of the Apple TV, Mac mini or an actual network-connected TV, it will mean there are more devices in the living room that Boxee can run on.

We also hope that Apple will open up Apple TV for the developers, so that Boxee (as well as other similar applications) could be easily installed." The introduction of an all-in-one Apple television system could become a market-leading system.

Munster goes on to speculate: "Such a device would command a premium among a competitive field of budget TVs; we believe Apple could differentiate itself with software that makes home entertainment simple and solve a pain point for consumers (complicated TV and component systems)," he said. "Apple has indicated that it only wants to participate in categories it feels it can make a difference (and win) in. And, like with the smartphone market, we believe connected TVs fit the company's criteria," he added.

Munster is not alone with this way of thinking. Bernstein analyst Toni Sacconaghi also thinks that Apple should transform its device into a cable box. A report on Business Week echoes these musings, observing: "There's a pent-up demand among a core group of early-adopting consumers to push their extensive video collections out of their computers and into their TVs." Apple's recent $500 million five-year deal with LG Electronics may be worth keeping a close eye on.

This ostensibly secures supplies of computer screens, but remember that LG also makes televisions. There is no reason not to believe that the company could even be Apple's secret partner in its future plans for its hobby product…

Apple COO Tim Cook recently commented: "We are going to continue to invest in [the Apple TV], because we fundamentally believe there is something there for us in the future."

With the US HDTV market predicted to reach ten million sets per year, any move to broaden the front-room offering to Apple's 65 million registered iTunes users has a strong chance.

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